U.S. Stocks Start Lower As Retail Giant Wal-Mart Disappoints

NEW YORK (MarketWatch) -- U.S. stocks started lower Thursday, with consumer discretionary shares hardest hit, after Wal-Mart Stores Inc. scaled back earnings expectations, showing that even the healthiest retailers are not recession-proof.

"Wal-Mart had been the stand-alone shining star, one of the two stocks up on the Dow [Jones Industrial Average] last year," said Art Hogan, chief market strategist at Jefferies & Co.

"Unfortunately, like the rest of retail, it's falling into the category of being hurt by lower consumer spending. Any way you slice it, Wal-Mart is going to be a big disappointment."

The Dow Jones Industrial Average fell 105.21 points to 8,664.49.

Twenty-three of the blue-chip index's 30 components posted early losses, with Wal-Mart the greatest laggard, off 9.2%. The world's largest retailer posted lower-than-expected December sales and cut its fourth-quarter forecast. .

A slew of other retailers -- including Gap Inc. , Macy's Inc. and Limited Brands Inc. -- cut their profit outlooks. .

The S&P 500 fell 8.91 points to 897.74, and the Nasdaq Composite declined 12.27 points to 1,586.79.

Better-than-anticipated weekly jobless claims data did little to overshadow the disappointing retail results, and they did not alter gloomy forecasts for Friday's unemployment report.

The government early Thursday reported a drop in weekly jobless claims, but analysts said the decline was likely due to technical glitches that come with seasonally adjusting the numbers around the holidays.

"The unemployment rate and change in nonfarm payroll numbers are expected to be bad. The issue is the magnitude," said Hogan.

Three-month dollar LIBOR continued to slide, falling to 1.35% from 1.4%.

Overnight in Asia, technology, energy and financial shares led regional markets lower, with the Hang Seng losing 3.8% and the Nikkei 225 slumping 3.9%.

In Europe, London's FTSE 100 index lost 1.7%, and the German DAX 30 fell 1.7% in early afternoon trading, with big losses seen for the metals sector.

U.S. stocks dropped Wednesday after job-cut and profit warnings from heavyweights like Alcoa Inc. and Intel Corp. combined with a report from payrolls processor ADP estimating nearly 700,000 private-sector jobs were lost last month. The Dow Jones Industrial Average dropped 245 points, the Nasdaq Composite lost 53 points, and the S&P 500 dropped 28 points.

By Kate Gibson